Major step forward to help people struggling with impact of medical debt

A long-supported PIRG policy about medical debt was given a major boost by the federal Consumer Financial Protection Bureau (CFPB). Director Rohit Chopra announced the intention of issuing new rules to prevent credit bureaus from listing any medical debt on credit reports. Part of the proposed rules would no longer allow debt collectors from using the threat of credit reporting as leverage to pressure consumers into paying questionable debts.

The federal Consumer Financial Protection Bureau (CFPB) issued a report in 2022 that exposed the widespread problem of medical debt for American families. More than $88 billion in medical bills have been included in credit reports. These debts, even when paid, can remain on credit reports for seven years, making it less likely for affected individuals to get loans, buy a home, or in some cases, to even get a job. Debt in general has an added negative impact on individuals’ long-term health. 

That report triggered action by the three major credit bureaus (Equifax, Experian and TransUnion) to voluntarily change how they treat the reporting of medical debt.  They pledged to: 

1. Remove paid-off medical debt from credit reports.
2. Remove medical debt under $500 from credit reports. 
3. Delay reporting of medical report on credit reports by one year, to allow patients time to pay off their bills or fix billing errors. 

But PIRG and our coalition partners knew these voluntary adjustments didn’t go far enough. We continued to advocate for stronger reform. Today’s announcement brings us one step closer to winning permanent changes in how medical debt is treated by credit reporting agencies. 

“As health care prices rise and patients are left shouldering more of the costs in out-of-pocket expenses, this announcement is welcome news,” said Patricia Kelmar, senior director of health care campaigns for U.S. PIRG.  “We’ve known for years that medical debt doesn’t predict credit defaults, nor does it accurately predict a person’s desire and willingness to pay off loans. In fact, CFPB’s own research showed that medical billing data on a credit report is ‘less predictive of future repayment than reporting on traditional credit obligations.”